Despite a revival in monsoon rainfall raising prospects of a recovery in kharif output, prices of essential commodities have surged by up to 23.5 per cent in the past month.
After a 13 per cent decline until July, creating a widespread fear of drought across the country, the monsoon revived in the first week of August. Yet, major germinating time for summer-sown crops such as rice, oilseeds and pulses was lost, as overall rainfall remained lower than the long-term average.
Data compiled by the Union ministry of agriculture showed the area under paddy (unprocessed rice) remained lower by 3.7 per cent, at 35.6 million hectares (mha) until September 7. Coarse cereals and pulses’ sowing area reported a decline of 10.5 per cent and 7.2 per cent, at 17.4 mha and 9.8 mha, respectively. Sown area under oilseeds declined 3.7 per cent to 17 mha.
“The recent revival of the monsoon has pulled the seasonal rainfall deficit down to nine per cent of the normal – below the 10 per cent drought point - from 22 per cent in mid-July. This should save the winter - rabi - crop from drought. But it is too late to reverse the damage done to the ongoing autumn - kharif – harvest,” said Indranil Sen Gupta, India Economist, DSP Merrill Lynch.
Indus waters, a proxy for moisture conditions in north Indian wheat fields, have risen to 94 per cent below normal from 55 per cent in mid-July. Water in the Bhakra, Pong and Thein dam reservoirs have climbed to almost 90 per cent of the normal.
Still, drought concerns have driven Indian agricultural inflation way beyond global agri inflation, even adjusted for depreciation in the rupee. Domestic oilseed prices have jumped 25.2 per cent, although crude palm oil prices have actually fallen 6.5 per cent so far this season. Indian raw cotton prices have gone up 10.6 per cent over March-July while the Cotlook (Cotton Outlook) index has declined almost 20 per cent, with the US department of agriculture raising global raw cotton production estimates and cutting those for consumption. Domestic sugar prices have risen a little over 20 per cent while international prices have fallen 20 per cent on a good crop in Brazil.
| UNABATED SURGE Price movement of various agri commodities (Rs/qtl) | |||
| Commodity | Aug 10 | Sept 10 | Chg (%) |
| Rice HMT | 3,450.00 | 3,750.00 | 8.7 |
| Wheat (Lokvan) | 1,900.00 | 2,200.00 | 15.8 |
| Sugar | 3,450.00 | 3,780.00 | 9.6 |
| Potato | 1,550.00 | 1,750.00 | 12.9 |
| Onion | 850.00 | 1,050.00 | 23.5 |
| Sunflower oil* | 79.50 | 84.50. | 6.3 |
| Mustard oil* | 115.00 | 120.00 | 4.3 |
| * Price in Rs /litre, Source: APMC, Vashi | |||
Market sources believe overall agri output would be lower this kharif season as compared to last year. Sanjaya Satapathy, an analyst specialising on sugar argues that the current price rally is overdone. Meanwhile, an Assocham report forecast prices of essential commodities such as sugar, pulses and edible oils to jump 15 per cent on ensueing festive demand.
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“Consumers are likely to feel the pinch of rising food prices in the coming festive season due to shortage of rainfall in crop growing areas. Traditionally, the demand for such commodities increases with the onset of festivals like Durga Puja, Diwali and Christmas. This year, production is also expected to be affected due to less rain,” said D S Rawat, secretary, Assocham.
An analyst with a leading brokerage firm attributed the ongoing spurt in agri commodities to supply disruption from states with flooding problems.